From Black Friday to Fabulous Friday: Sensex stages best-ever rebound, zooms 1,325 pts

Mumbai: Benchmark equity index Sensex posted a spectacular recovery and closed more than 1,300 points higher on Friday after hitting the lower circuit in early trade as hopes of a US stimulus package to deal with coronavirus pandemic boosted stocks across the globe.

What started as a Black Friday for investors, turned out to be a day of spectacular gains, as Sensex saw a wild rebound of 4,715 points in the day after a 45-minute trading halt.

The 30-share Sensex closed 4.40 per cent or 1,325.34 points higher at 34,103.48 while the 50-share Nifty rose 4.52 per cent or 433.50 points to close at 10,023.65.

Earlier in the day, Sensex fell as much as 10.34 per cent or 3,389.17 points to 29,388.97 while Nifty declined as much as 10.79 per cent or 1,035 points to 8,555.15.

Trading was halted for 45 minutes after the market hit lower circuit.

Later as the market staged a recovery, Sensex rose as much as 6.07 per cent or 1,991.34 points to 34,769.48 while Nifty gained as much as 5.94 per cent or 569.25 points to 10,159.40.

Short-covering, particularly in Nifty Bank, helped boost sentiment as the market recovered. Chandan Taparia of Motilal Oswal Securities said that after the initial panic in the market, build-up of long positions were seen in Nifty. What lifted the index sharply, however, was the short coverings in Nifty Bank, he added.

Assurances by regulators the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) also allayed some fears.

Sebi and stock exchanges have a robust risk management framework in place which automatically gets triggered in response to movement in the indices as well as stocks in the cash and derivatives market, Sebi said in a statement following drastic fall in Sensex and Nifty.

The market regulator added that some of these measures include Value at Risk (VaR) margin with an initial margin to cover 99 per cent risk of a transaction and extreme loss margin to cover the residual risk of a transaction.

The Reserve Bank of India (RBI) also said it is closely monitoring the global situation and will take all necessary measures to ensure that markets remain adequately liquid and stable, and continue to function normally.

Markets at a glance:

The strong recovery in the market did not reflect in the market breadth. The number of losers on BSE were marginally higher than the number of gainers.

The rebound in the broader market lagged the frontline index. BSE MidCap and BSE SmallCap indices rose 2.09 per cent and 1.26 per cent respectively.

All the sectoral indices closed in the green. BSE Bankex staged a strong recovery after a steep decline in early trade. It fell as much as 11.19 per cent in early trade, and later closed 4.68 per cent higher.

BSE Telecom index was the top gainer, and closed 6.39 per cent higher. Vodafone Idea stock surged over 35.71 per cent and Bharti Airtel jumped 5.44 per cent on reports that the Union Cabinet has approved a proposal for a relief package that will help operators reeling under the adjusted gross revenue (AGR) crisis.

As many as 25 Sensex stocks closed higher. This is in contrast to all the Sensex constituents trading in deep red earlier in the day.

Financials contributed the most to Sensex’s gains. Mortgage lender HDFC was the top contributor as it rose 10.33 per cent. Top lender State Bank of India jumped 13.87 per cent. Private lenders ICICI Bank and HDFC Bank logged 5.28 per cent and 5.17 per cent gain respectively.

Oil-to-telecom behemoth Reliance industries rose 4.27 per cent.

On the other hand, Nestle India, Asian Paints and Hindustan Unilever shed 3.97 per cent, 2.35 per cent and 1.27 per cent respectively.

YES Bank closed 2 per cent higher ahead of its third-quarter earnings announcement on Saturday.

Analysts’ views:

“One should approach it very cautiously. We are in bear market territory and if you go back to all the earlier bear markets, whether it was to do with dotcom, SARS or Asian crisis or 2008 crisis — bear markets do not get over in a month or two,” -- Devina Mehra, director & chief investment strategist, First Global.

“From these levels, we’re sanguine on Indian equities from a 24-36 month perspective. We believe monetary and fiscal stimulus will come through soon, low price of crude and cheap valuation will favour investment,” -- Amar Ambani, senior president & institutional research head, YES Securities

"Indian markets reached capitulation today amidst mayhem as exchanges were forced to shut down markets on hitting the circuit filter. Markets after reopening displayed a highly spirited recovery in anticipation of a stimulus today post market by the GOI. The intraday swing in indices witnessed today was truly unnerving but provided a tremendous buying opportunity for those under allocated towards equities," -- S Ranganathan, head of research at LKP Securities.

Global markets:

European stock markets bounced back on Friday from their worst day ever, as signs of a U.S. stimulus package helped soothe fears about an economic shock from the coronavirus pandemic, Reuters reported.

The benchmark STOXX 600 index was up 4 per cent at 0805 GMT, following a 12 per cent plunge on Thursday on rising fears of a liquidity crunch after the European Central Bank decided to keep interest rates steady.

Asian stocks plunged with coronavirus panic selling hitting nearly every asset class - before finding some kind of floor as hopes turned to a U.S. stimulus package, Reuters report said.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.3 per cent by mid-afternoon after being down more than 5 per cent during the morning.